Gold hits six-week trough on stronger dollar, rate hike worries

Gold prices slipped to a more than one-month low on Thursday, as the dollar firmed and prospects of the U.S. Federal Reserve continuing with its aggressive policy tightening stance weighed on the zero-yielding bullion's appeal.

FUNDAMENTALS

Spot gold XAU= fell 0.2% to $1,706.99 per ounce, as of 0100 GMT, after hitting its lowest level since July 21 at $1,704.94 earlier.


U.S. gold futures GCv1 shed 0.5% to $1,717.50.

The dollar index USD= was 0.1% higher, while the benchmark U.S. Treasury 10-year yields US10YT=RR rising to their highest level since June 28. USD/ US/

The Fed will need to raise interest rates somewhat above 4% by early next year and then hold them there in order to bring too high inflation back down to the central bank's goal, Cleveland Federal Reserve Bank President Loretta Mester said on Wednesday.

Even though gold is seen as a hedge against inflation, higher interest rates increase the opportunity cost of holding bullion and boosts the dollar.

Euro zone inflation jumped to another record high and will soon hit double-digit territory, heralding a string of big interest rate hikes even as a painful recession appears increasingly certain. (Full Story)

U.S. private payrolls increased moderately in August, according to the ADP National Employment report. (Full Story)

SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.3% to 973.37 tonnes on Wednesday. (Full Story)

Spot silver XAG= dropped 0.8% to $17.83 per ounce after falling to a more than two-year low. Platinum XPT= fell 0.9% to $838.24 and palladium XPD= was 0.6% lower at $2,072.09.

DATA/EVENTS (GMT)

0145 China Caixin Mfg PMI Final Aug

0500 India S&P Global Mfg PMI Aug

0600 UK Nationwide house price MM, YY Aug

0750 France S&P Global Mfg PMI Aug

0755 Germany S&P Global/BME Mfg PMI Aug

0800 EU S&P Global Mfg Final PMI Aug

0830 UK S&P GLBL/CIPS Mfg Final PMI Fnl Aug

0900 EU Unemployment Rate July

1230 US Initial Jobless Clm Weekly

1345 US S&P Global Mfg PMI Final Aug

1400 US ISM Manufacturing PMI Aug